SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 1-6081
COMFORCE Corporation
(Exact name of registrant as specified in its charter)
Delaware 36-2262248
- -------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
415 Crossways Park Drive, P.O. Box 9006, Woodbury, New York 11797
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 437-3300
-----------------------------
Not Applicable
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Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 8, 2002
- ---------------------------------- -----------------------------
Common stock, $.01 par value 16,659,330 shares
COMFORCE Corporation
INDEX
Page
Number
PART I FINANCIAL INFORMATION.................................................3
Item 1. Financial Statements..................................................3
Consolidated Balance Sheets at June 30, 2002 (unaudited)
and December 30, 2001.............................................3
Consolidated Statements of Operations for the three
and six months ended June 30, 2002 and July 1, 2001 (unaudited)...4
Consolidated Statements of Cash Flows for the six months
ended June 30, 2002 and July 1, 2001 (unaudited)..................5
Notes to Unaudited Consolidated Financial Statements..................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................12
Item 3. Quantitative and Qualitative Disclosure about Market Risk............18
PART II OTHER INFORMATION....................................................18
Item 1. Legal Proceedings (not applicable)...................................18
Item 2. Changes in Securities and Use of Proceeds (not applicable)...........18
Item 3. Defaults Upon Senior Securities (not applicable).....................18
Item 4. Submission of Matters to a Vote of Security Holders..................18
Item 5. Other Information (not applicable)...................................19
Item 6. Exhibits and Reports on Form 8-K ..................................19
SIGNATURES....................................................................20
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
June 30, December 30,
2002 2001
------------------ ---------------
ASSETS: (unaudited)
Current assets:
Cash and cash equivalents $ 5,031 $ 4,067
Accounts receivable, net 46,799 44,091
Funding and service fees receivable, net 28,809 35,938
Prepaid expenses and other current assets 3,235 5,733
------------------ ---------------
Total current assets 83,874 89,829
Deferred income taxes, net 1,619 --
Property and equipment, net 12,958 12,590
Intangible assets, net 231 --
Goodwill, net 79,242 134,283
Deferred financing costs, net 2,882 3,307
------------------ ---------------
Total assets $ 180,806 $ 240,009
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 1,995 $ 3,440
Accrued expenses 29,743 28,487
------------------ ---------------
Total current liabilities 31,738 31,927
Long-term debt 150,609 154,720
Deferred income taxes, net -- 581
Other liabilities 425 244
------------------ ---------------
Total liabilities 182,772 187,472
------------------ ---------------
Commitments and contingencies
Stockholders' (deficit) equity:
Common stock, $.01 par value; 100,000,000 shares authorized;
16,659,334 shares and 16,659,173 shares issued and outstanding
at June 30, 2002 and December 30, 2001, respectively
167 167
Additional paid-in capital 49,589 49,581
Accumulated other comprehensive loss (94) (309)
(Accumulated deficit) retained earnings (51,628) 3,098
------------------ ---------------
Total stockholders' (deficit) equity (1,966) 52,537
------------------ ---------------
Total liabilities and stockholders' (deficit) equity $ 180,806 $ 240,009
================== ===============
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
COMFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, July 1, June 30, July 1,
2002 2001 2002 2001
------------- -------------- ------------- --------------
Revenue:
Net sales of service $ 94,387 $ 112,207 $188,225 $ 235,559
Costs and expenses:
Cost of services 76,355 88,237 153,042 185,117
Selling, general and administrative expenses 13,840 16,736 27,680 34,495
Depreciation and amortization 1,092 1,955 1,981 3,873
------------- -------------- ------------- --------------
Total costs and expenses 91,287 106,928 182,703 223,485
------------- -------------- ------------- --------------
Operating income 3,100 5,279 5,522 12,074
------------- -------------- ------------- --------------
Other income (expense):
Interest expense (4,043) (5,129) (8,040) (10,822)
Gain on debt extinguishment -- -- -- 6,536
Other income, net 158 27 163 29
------------- -------------- ------------- --------------
(3,885) (5,102) (7,877) (4,257)
------------- -------------- ------------- --------------
Income (loss) before tax (785) 177 (2,355) 7,817
Provision (benefit) for income taxes 153 578 (429) 4,199
------------- -------------- ------------- --------------
Income (loss) before a cumulative effect of a
change in accounting principle (938) (401) (1,926) 3,618
Cumulative effect of a change in accounting principle --
goodwill impairment, net of tax benefit of $2,200 -- -- (52,800) --
------------- -------------- ------------- --------------
Net income (loss) $ (938) $ (401) $ (54,726) $ 3,618
------------- -------------- ------------- --------------
Basic income (loss) per common share:
Income (loss) before a cumulative effect of a change in
accounting principle $ (0.06) $ (0.02) $ (0.12) $ 0.22
Cumulative effect of a change in accounting principle
-goodwill impairment -- -- (3.17) --
------------- -------------- ------------- --------------
Net income (loss) $ (0.06) $ (0.02) $ (3.29) $ 0.22
============= ============== ============= ==============
Diluted income (loss) per common share:
Income (loss) before a cumulative effect of a change in 0
accounting principle $ (0.06) $ (0.02) $ (0.12) $ 0.21
Cumulative effect of a change in accounting principle
goodwill impairment -- -- (3.17) --
------------- -------------- ------------- --------------
Net income (loss) $ (0.06) $ (0.02) $ (3.29) $ 0.21
============= ============== ============= ==============
Weighted average common shares outstanding, basic 16,659 16,659 16,659 16,659
============= ============== ============= ==============
Weighted average common shares outstanding, diluted 16,659 16,659 16,659 16,867
============= ============== ============= ==============
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
COMFORCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
---------------------------------------
June 30, 2002 July 1, 2001
------------------ -----------------
Cash flows from operating activities:
Net income (loss) $ (54,726) $ 3,618
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 1,981 3,873
Amortization of deferred financing fees 505 394
Issuance of notes in lieu of interest 1,104 1,923
Gain on repurchase of Senior Notes -- (3,790)
Gain on repurchase of PIK Debentures -- (2,746)
Write-off of goodwill, net of tax 52,800 --
Gain on sale of fixed assets (156) --
Changes in assets and liabilities, net of effects of acquisitions
of businesses:
Accounts receivable and funding service fees receivable 4,636 14,243
Prepaid expenses and other current assets 1,688 135
Accounts payable and accrued expenses (221) (3,381)
Decrease in income tax receivable 810 --
------------------ -----------------
Net cash provided by operating activities 8,421 14,269
------------------ -----------------
Cash flows from investing activities:
Purchases of property and equipment (2,200) (2,037)
Cash proceeds from sale of fixed assets 434 --
Payments of contingent consideration (323) (672)
(Increase) in deferred costs and other assets -- (250)
------------------ -----------------
Net cash used in investing activities (2,089) (2,959)
------------------ -----------------
Cash flows from financing activities:
Net repayments under capital lease obligations (73) (58)
Net (repayments) borrowings under line of credit agreements (5,215) 761
Repurchase of Senior Notes and PIK Debentures -- (11,336)
Debt financing costs (80) (163)
------------------ -----------------
Net cash used in financing activities (5,368) (10,796)
------------------ -----------------
Net increase in cash and cash equivalents 964 514
Cash and cash equivalents at beginning of period 4,067 4,940
------------------ -----------------
Cash and cash equivalents at end of period $ 5,031 $ 5,454
================== =================
Supplemental disclosures:
Cash paid for:
Interest $ 6,287 $ 6,756
Income taxes 269 3,584
The accompanying notes are an integral part of the unaudited consolidated
financial statements.
COMFORCE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The accompanying unaudited interim consolidated financial statements of
COMFORCE Corporation ("COMFORCE") and its subsidiaries, including COMFORCE
Operating, Inc. ("COI") (collectively, the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements have been condensed or omitted pursuant to those rules and
regulations. In the opinion of management, all adjustments, consisting of normal
recurring adjustments considered necessary for a fair presentation, have been
included. Although management believes that the disclosures made are adequate to
ensure that the information presented is not misleading, it is suggested that
these financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 30, 2001. The results for the three and six months
ended June 30, 2002 are not necessarily indicative of the results of operations
for the entire year.
2. DEBT
Notes payable and long-term debt at June 30, 2002 and December 30, 2001
consisted of (in thousands):
June 30, December 30,
2002 2001
------------------- -----------------
12% Senior Notes, due 2007 $ 87,000 $ 87,000
15% Senior Secured PIK Debentures, due 2009 11,158 10,379
8% Subordinated Convertible Notes due 2009 8,446 8,121
Revolving line of credit, due December 14, 2003, with interest
payable monthly at LIBOR plus 3.0% with a weighted average rate
of 4.49% at June 30, 2002 and LIBOR plus 2.25% with a weighted
average rate of 4.33% at December 30, 2001 44,005 49,220
------------------- -----------------
Total long-term debt $ 150,609 $ 154,720
=================== =================
The debt service costs associated with COMFORCE's 15% Senior Secured PIK
Debentures due 2009 (the "PIK Debentures") may be satisfied through issuance of
new PIK Debentures through December 1, 2002 and the debt service costs
associated with COMFORCE's 8% Subordinated Convertible Notes due 2009 (the
"Convertible Notes") may be satisfied through issuance of new Convertible Notes
through December 1, 2003. Beginning with the interest payment due June 1, 2003,
COMFORCE will be required to pay interest on the PIK Debentures in cash, and
beginning with the interest payment due June 1, 2004, COMFORCE will be required
to pay interest on the Convertible Notes in cash. Its ability to do so will be
dependent on the ability of COI to borrow funds for this purpose under the IBJ
Credit Facility and to upstream funds under the restricted payments test. In
addition, COMFORCE's ability to repay the PIK Debentures and the Convertible
Notes at their respective maturity dates in December 2009, or on any earlier
required repayment or repurchase dates, will also be dependent on the ability of
COI to upstream funds for these purposes under the restricted payments test,
unless COMFORCE separately obtains a loan or sells its capital stock or other
securities to provide funds therefor.
Effective as of May 10, 2002, the Company entered into an amendment to the
IBJ Credit Facility to, among other things (i) waive the Company's
non-compliance with the fixed-charge coverage ratio for the period ended March
31, 2002, (ii) reduce the fixed-charge coverage ratio in future periods, and
(iii) increase each level of the applicable rate and LIBOR margins by 0.25%.
3. FISCAL YEAR
On March 22, 2001, the Company's Board of Directors adopted a resolution to
change the Company's fiscal year, which was previously a calendar year.
Beginning in 2001, the fiscal year consists of the 52 or 53 weeks ending on the
last Sunday in December. Accordingly, the Company's current fiscal year will end
on Sunday, December 29, 2002.
4. INCOME (LOSS) PER SHARE
Basic income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during each period. Diluted income (loss) per share is computed assuming the
conversion of stock options and warrants with a market value greater than the
exercise price to the extent such conversion assumption is dilutive. The
following represents a reconciliation of the numerators and denominators for
basic and diluted income (loss) per share for the three and six month periods
ended June 30, 2002 and July 1, 2001 (in thousands):
Three Months Ended Six Months Ended
------------------------------------ -------------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
----------------- --------------- ----------------- ----------------
Numerator:
Income (loss) before a cumulative
effect of a change in accounting
principle $ (938) $ (401) $ (1,926) $ 3,618
Cumulative effect of a change in
accounting principle --
goodwill impairment, net of
tax benefit -- -- (52,800) --
----------------- --------------- ----------------- ----------------
Net income (loss) $ (938) $ (401) $ (54,726) $ 3,618
================= =============== ================= ================
Denominator:
Weighted average shares -- basic 16,659 16,659 16,659 16,659
Effect of dilutive securities:
Warrants and Employee stock options
-- -- -- 208
----------------- --------------- ----------------- ----------------
Denominator for diluted income (loss)
per share - adjusted weighted
average shares and assumed
conversions 16,659 16,659 16,659 16,867
================= =============== ================= ================
Outstanding options and warrants to purchase shares of common stock,
representing approximately 3.6 million shares of common stock, were not included
in the computations of diluted net income (loss) per share for the three and six
months ended June 30, 2002 because their effect would be anti-dilutive.
5. STOCK OPTIONS
During the first six months of 2002, the Company granted options to
purchase in aggregate of 60,000 shares of the Company's common stock at an
exercise price of $1.10 per share and 535,000 shares of the Company's common
stock at an exercise price of $1.45, which was equal to or greater than the fair
market value of the common stock on the date of grant. These options were
granted to 23 individuals who are officers, directors, employees or agents of
the Company. These options were granted under the Company's Long-Term Stock
Investment Plan. The options granted to directors provide for vesting on the
first anniversary of the date of grant and the remaining options provide for
vesting 6, 18 and 30 months after the date of grant in equal increments.
At the annual meeting of stockholders of the Company held June 13, 2002,
the stockholders approved the COMFORCE Corporation 2002 Stock Option Plan under
which options to purchase up to 1,000,000 shares of the Company's common stock
may be granted by the Company to officers, directors, employees and agents of
the Company at exercise prices not less than market prices at the date of grant.
To date, no options have been issued under this plan.
6. INDUSTRY SEGMENT INFORMATION
COMFORCE has determined that its reportable segments can be distinguished
principally by the types of services offered to the Company's clients.
The Company reports its results through three operating segments -- Staff
Augmentation, Human Capital Management Services and Financial Outsourcing
Services. The Staff Augmentation segment provides information technology (IT),
telecom, healthcare support, and technical and engineering services. The Human
Capital Management Services segment provides contingent workforce management
services. The Financial Outsourcing Services segment provides funding and back
office support services to independent consulting and staffing companies.
The accounting policies of the segments are the same as those described in
Note 2 to the consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 30, 2001.
COMFORCE evaluates the performance of its segments and allocates resources to
them based on operating contribution, which represents segment revenues less
direct costs of operations, excluding the allocation of corporate general and
administrative expenses. Assets of the operating segments reflect primarily net
accounts receivable and goodwill associated with segment activities; all other
assets are included as corporate assets. The Company does not account for
expenditures for long-lived assets on a segment basis.
The table below presents information on the revenues and operating
contribution for each segment for the three and six months ended June 30, 2002
and July 1, 2001, and items which reconcile segment operating contribution to
COMFORCE's reported pre-tax income (loss) (in thousands):
Three Months Ended Six Months Ended
---------------------------------------------- -----------------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
---------------------- -------------------- --------------------- ----------------
Net sales of services:
Staff Augmentation $ 51,259 $ 77,786 $ 105,800 $ 165,149
Human Capital Management Services 40,718 31,237 77,767 63,934
Financial Outsourcing Services 2,410 3,184 4,658 6,476
---------------------- -------------------- --------------------- ----------------
$ 94,387 $ 112,207 $ 188,225 $ 235,559
---------------------- -------------------- --------------------- ----------------
Operating contribution:
Staff Augmentation $ 4,755 $ 8,387 $ 9,352 $ 18,525
Human Capital Management Services 1,554 772 2,907 1,203
Financial Outsourcing Services 1,700 2,472 2,780 5,068
--------------------- -------------------- --------------------- -----------------
8,009 11,631 15,039 24,796
---------------------- -------------------- --------------------- ----------------
Consolidated expenses(income):
Interest and other, net 3,885 5,102 7,877 10,793
Depreciation and amortization 1,092 1,955 1,981 3,873
Gain on debt extinguishment -- -- -- (6,536)
Corporate general and
administrative expenses 3,817 4,397 7,536 8,849
---------------------- -------------------- --------------------- ----------------
8,794 11,454 17,394 16,979
Income (loss) before taxes $ (785) $ 177 $ (2,355) $ 7,817
====================== ==================== ===================== ================
At June 30, 2002 At Dec. 30, 2001
----------------- -----------------
Total assets:
Staff Augmentation $ 99,427 $ 143,009
Human Capital Management Services 26,614 25,965
Financial Outsourcing Services 28,809 45,338
Corporate 25,956 25,697
---------------- ----------------
$ 180,806 $ 240,009
================ ================
7. ACCOUNTING FOR BUSINESS COMBINATIONS, GOODWILL AND OTHER INTANGIBLE ASSETS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 141, Business Combinations ("SFAS 141"), Statement No. 142,
Goodwill and Other Intangible Assets ("SFAS 142") and in August 2001 the FASB
issued Statement No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets ("SFAS 144"). SFAS 141 specifies criteria that intangible
assets acquired in a purchase method business combination must meet to be
recognized and reported apart from goodwill. SFAS 142 eliminates the requirement
to amortize goodwill and intangible assets with indefinite useful lives.
Instead, they will be tested for impairment at least annually in accordance with
the provisions of SFAS 142. SFAS 142 also requires that intangible assets with
definite useful lives be amortized over their respective estimated useful lives
and to their estimated residual values, and reviewed for impairment in
accordance with SFAS 144.
The Company has adopted the provisions of SFAS 141 upon issuance and the
provisions of SFAS 142 as of the beginning of fiscal year 2002. The Company has
evaluated its existing intangible assets and goodwill that were acquired in
prior purchase business combinations and has reclassified $264,000 net carrying
value of goodwill to intangible assets in order to conform to the new criteria
in SFAS 141 for recognition apart from goodwill. The Company has reassessed the
useful lives and residual values of the intangible assets acquired, and has
determined that no amortization period adjustments were necessary.
The intangible assets with definite useful lives are comprised of covenants
not to compete (being amortized over periods ranging from 8 to 10 years) with a
gross carrying amount of $558,000 and accumulated amortization of $327,000 as of
June 30, 2002. The amortization expense for the three months ended June 30, 2002
was $17,000 and generated a tax benefit of $6,900. The amortization expense for
the six months ended June 30, 2002 was $33,000 and generated a tax benefit of
$13,000. The estimated amortization expense for the following years is as
follows (in thousands):
For year ended 12/29/02 $ 66
For year ended 12/28/03 41
For year ended 12/26/04 41
For year ended 12/25/05 41
For year ended 12/31/06 20
The Company has tested goodwill for impairment in accordance with the
provisions of SFAS 142 as of the beginning of fiscal year 2002. In connection
with the goodwill test, the Company engaged an independent firm to determine the
fair values of its reporting units (as defined by SFAS 142). In its
determination of the fair values, the firm engaged by the Company utilized
various valuation approaches, including (a) discounted cash flow analysis, (b)
recent values paid by investors and purchasers of companies in businesses
similar to that of the Company, (c) capitalization multiples of companies with
investment characteristics resembling those of the reporting units, (d) the
enterprise value of the Company, and (e) asset and liability structure. Based on
management's assessment of the circumstances, considering the firm's findings,
the Company recognized an impairment loss of $55.0 million ($43.7 million for
Staff Augmentation, $9.4 million for Financial Outsourcing Services and $1.9
million for Human Capital Management Services) as a cumulative effect of a
change in accounting principle in the accompanying financial statements. These
impairment losses relate primarily to the goodwill attributable to staffing
companies acquired by the Company in 1996 and 1997, during which time (i)
staffing companies were customarily valued at higher levels than they currently
command and (ii) the market price of the Company's common stock was
substantially higher than the current market price.
The changes in the carrying amount of goodwill for the six months ended
June 30, 2002 is as follows (in thousands):
Human
Staff Capital Financial
Augmentation Management Outsourcing Total
--------------- -------------- ---------------- ----------------
Balance as of December 30, 2001 $ 113,783 $ 11,100 $ 9,400 $ 134,283
Goodwill acquired during year 223 -- -- 223
Impairment losses (43,700) (1,900) (9,400) (55,000)
Amounts reclassified to
intangible assets, net (264) -- -- (264)
--------------- -------------- ---------------- ----------------
Balance as of June 30, 2002 $ 70,042 $ 9,200 $ -- $ 79,242
=============== ============== ================ ================
Goodwill amortization for the three and six months ended July 1, 2001 was
$1.1 million and $2.1, respectively, and generated tax benefits of $69,000 and
$139,000, respectively. The following table shows the results of operations as
if SFAS 142 was applied to prior periods (in thousands, except per share
amounts):
Three Months Ended Six Months Ended
------------------------------------ -- ------------------------------------
June 30, 2002 July 1, 2001 June 30, 2002 July 1, 2001
---------------- --------------- ---------------- ----------------
Income (loss) before a cumulative effect of a
change in accounting principle, as reported $ (938) $ (401) $ (1,926) $ 3,618
Plus:
Goodwill amortization, net of tax -- 981 -- 1,961
---------------- --------------- ---------------- ----------------
Adjusted income (loss) before a cumulative
effect of a change in accounting
principle $ (938) $ 580 $ (1,926) $ 5,579
================ =============== ================ ================
Basic income (loss) per common share:
Income (loss) before a cumulative effect
of a change in accounting principle, as
reported $ (0.06) $ (0.02) $ (0.12) $ 0.22
Goodwill amortization, net of tax -- 0.06 -- 0.12
---------------- --------------- ---------------- ----------------
Adjusted income (loss) before a cumulative
effect of a change in accounting
principle $ (0.06) $ 0.04 $ (0.12) $ 0.34
================ =============== ================ ================
Diluted income (loss) per common share:
Income (loss) before a cumulative effect
of a change in accounting principle, as
reported $ (0.06) $ (0.02) $ (0.12) $ 0.21
Goodwill amortization, net of tax -- 0.06 -- 0.12
---------------- --------------- ---------------- ----------------
Adjusted income (loss) before a
cumulative effect of a change in
accounting principle $ (0.06) $ 0.04 $ (0.12) $ 0.33
================ =============== ================ ================
8. ACCOUNTING FOR EXTINGUISHMENT OF DEBT
The Financial Accounting Standard Board ("FASB") issued Statement No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No.
13, and Technical Corrections ("SFAS 145"). SFAS 145 rescinds Statement 4, which
required all gains and losses from extinguishment of debt to be aggregated and,
if material, classified as an extraordinary item, net of related income tax
effect. As a result, the criteria in Opinion 30 will now be used to classify
those gains and losses both on a prospective and retrospective basis. The
provisions of SFAS 145 are effective for fiscal years beginning after May 15,
2002, with early adoption of the provisions related to the rescission of
Statement 4 encouraged. As a result, the Company adopted SFAS 145 during the
second fiscal quarter of 2002.
The adoption of SFAS 145 had no impact upon the Company's consolidated
balance sheet or net income in its consolidated statement of operations for any
period, but required a reclassification of the gain on the extinguishment of
debt, net of related income tax effect, for fiscal 2000 and 2001 and the
quarterly periods during such years in which the Company repurchased its debt at
a discount. For these periods, the gain, before any tax effect, has been
recorded as other income and the income (loss) before tax and the provision for
income taxes line items have been adjusted accordingly. The Company's
consolidated statement of operations for the six months ended July 1, 2001 has
been reclassified as described, and the reclassifications for other periods will
be reflected in future quarterly and annual reports of the Company in which
statements for the relevant periods are required to be included.
9. NEW ACCOUNTING STANDARDS
In August 2001, the FASB issued Statement No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. However, SFAS 144 retains
the fundamental provisions of SFAS 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. SFAS 144 supersedes the accounting
and reporting provisions of APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business. However, SFAS 144 retains the
requirement of Opinion 30 to report discontinued operations separately from
continuing operations and extends that reporting to a component of an entity
that either has been disposed of (by sale, by abandonment, or in distribution to
owners) or is classified as held for sale. SFAS 144 also amends ARB No. 51,
Consolidated Financial Statement, to eliminate the exception to consolidation
for a temporarily controlled subsidiary. The Company adopted SFAS 144 effective
for calendar year 2002. The impact of the adoption did not have a material
impact on its consolidated financial statements since the impairment assessment
under SFAS 144 is largely unchanged from SFAS 121. The provisions of this
statement for assets held for use or other disposal generally are required to be
applied prospectively to newly initiated disposal activities and therefore, will
depend on future actions initiated by management. As a result, the Company
cannot determine the potential effects that the adoption of SFAS 144 will have
on its financial statements with respect to future disposal decisions, if any.
In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities ("SFAS 146"). SFAS 146 requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan. SFAS 146 will be applied to exit or disposal activities after December 31,
2002 and is not expected to have a material effect on the Company.
10. RECLASSIFICATIONS
Certain reclassifications have been made to conform prior period amounts to
the current period presentation. See also notes 7 and 8.
11. CONTINGENCIES
The Company is currently undergoing a payroll tax audit by the Internal
Revenue Service for the fiscal year 1999. The results of this audit are not yet
known.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion set forth below supplements the information found in the
unaudited consolidated financial statements and related notes of COMFORCE
Corporation ("COMFORCE") and its subsidiaries, including COMFORCE Operating,
Inc. ("COI") (collectively, the "Company").
Overview
From the time it entered the staffing business in October 1995 through
January 1998, the Company completed 10 acquisitions. In February 2000, it
completed one additional acquisition. Each of these acquisitions has been
accounted for on a purchase basis and the results of operations of each of the
businesses acquired have been included in the Company's historical consolidated
financial statements from the date of acquisition. Certain of these acquisitions
provide for contingent payments by the Company as a part of the purchase
consideration based upon the operating results of the acquired businesses for
specified future periods. The acquisitions were financed by the Company
principally through the issuance of debt and equity securities and borrowings
under credit facilities.
Staffing personnel placed by the Company are employees of the Company. The
Company is responsible for employee related expenses for its employees,
including workers' compensation, unemployment compensation insurance, Medicare
and Social Security taxes and general payroll expenses. The Company offers
health, dental, disability and life insurance to its eligible billable
employees. Staffing and consulting companies, including the Company, typically
pay their billable employees for their services before receiving payment from
their customers, often resulting in significant outstanding receivables. To the
extent the Company grows, these receivables will increase and there will be
greater requirements for borrowing availability under its credit facility to
fund current operations.
The Company reports its results through three operating segments -- Staff
Augmentation, Human Capital Management Services and Financial Outsourcing
Services (formerly known as Financial Services). The Staff Augmentation segment
provides information technology (IT), telecom, healthcare support, technical and
other staffing services. The Human Capital Management Services segment provides
contingent workforce management services. The Financial Outsourcing Services
segment provides payroll, funding and back office support services to
independent consulting and staffing companies.
Results of Operations
Three Months Ended June 30, 2002 Compared to Three Months Ended July 1, 2001
Net sales of services for the three months ended June 30, 2002 were $94.4
million, a decrease of 15.9% from net sales of services for the three months
ended July 1, 2001 of $112.2 million. The Company suffered a decrease in net
sales of services in Staff Augmentation and Financial Outsourcing Services
segments, offset by an increase in the Human Capital Management Services
segment. Due to an increase in the Human Capital Management segment client base,
net sales of services increased $9.5 million, or 30.4%. In the Staff
Augmentation segment, the decrease of $26.5 million or 34.1% is principally
attributable to a decline in the telecom industry resulting in lower sales to
telecom customers, and the continued economic slowdown within IT, technical and
other staffing services. Also, as a result of the current economic recession,
net sales of services decreased $774,000 or 24.3% in the Financial Outsourcing
Services segment.
Cost of services for the three months ended June 30, 2002 was 80.9% of net
sales of services as compared to cost of services of 78.6% for the three months
ended July 1, 2001. The cost of services as a percentage of net sales for the
second quarter of 2002 increased from the comparable period in 2001 principally
as a result of a decrease in permanent placement fees and a higher growth in the
Human Capital Management Services segment which has a higher cost of services as
a percentage of net sales of services.
Selling, general and administrative expenses as a percentage of net sales
of services were 14.7% for the three months ended June 30, 2002, compared to
14.9% for the three months ended July 1, 2001. Due to lower sales, as discussed
above, management continued to undertake initiatives to reduce selling, general
and administrative costs, and has been successful in controlling costs as sales
decreased. These costs were further reduced by lower commissions as a result of
the decrease of sales discussed above.
Operating income for the three months ended June 30, 2002 was $3.1 million
as compared to operating income of $5.3 million for the three months ended July
1, 2001. This 41.3% decrease in operating income for the three months ended June
30, 2002 resulted principally from a decrease in sales and gross margins in
Staff Augmentation and Financial Outsourcing Services segments, partially offset
by a reduction of $1.1 million in goodwill amortization.
The Company's interest expense for the three months ended June 30, 2002 is
attributable to the revolving credit facility agented by IBJ Whitehall Business
Credit Corporation (the "IBJ Credit Facility"), the Convertible Notes, the 12%
Senior Notes due 2007 (the "Senior Notes") and the PIK Debentures. The Company's
interest expense for the three months ended July 1, 2001 is attributable to the
IBJ Credit Facility, the Senior Notes and the PIK Debentures. During the first
quarter of 2001, the Company repurchased $13.0 million principal amount of
Senior Notes for $8.9 million and $5.2 million principal amount of PIK
Debentures for $2.5 million (including accrued and unpaid interest of $340,000),
the repurchase prices of which were paid from lower interest rate borrowings
under the IBJ Credit Facility. In September 2001, the Company completed the
exchange of $18.0 million principal amount of PIK Debentures for its Convertible
Note in the original principal amount of $8.0 million (bearing interest at the
per annum rate of 8%), plus $1.0 million in cash. The interest expense was lower
for the three months ended June 30, 2002 as compared to the three months ended
July 1, 2001 due to lower market interest rates and lower borrowing levels under
the IBJ Credit Facility as well as the reduction of Senior Notes and PIK
Debentures through the transactions described above.
The income tax provision for the three months ended June 30, 2002 was
$153,000 on a loss before tax of $785,000. The income tax provision for the
three months ended July 1, 2001 was $578,000 on income before tax of $177,000.
The Company provides for income taxes based upon the estimated effective rate
(on a year-to-date basis). As a result of the Company's revised forecasts in the
second quarter of 2002, the expected tax rate was reduced. The difference
between the federal statutory income tax rate and the Company's effective tax
rate relates primarily to the nondeductibility of a portion of the interest
expense associated with the PIK Debentures and state income taxes for both
periods as well as amortization expense associated with goodwill that was not
deductible in 2001.
Six Months Ended June 30, 2002 Compared to Six Months Ended July 1, 2001
Net sales of services for the six months ended June 30, 2002 were $188.2
million, a decrease of 20.1% from net sales of services for the six months ended
July 1, 2001 of $235.6 million. The Company suffered a decrease in net sales of
services in Staff Augmentation and Financial Outsourcing Services segments,
partially offset by an increase in the Human Capital Management Services
segment. Net of sales of services in the Human Capital Management Services
segment increased by $13.8 million or 21.6% due to an increase in its client
base. In the Staff Augmentation segment, the decrease of $59.4 million (35.9%)
is principally attributable to a sharp decline in the telecom industry resulting
in lower sales to telecom customers, and the continued economic slowdown within
IT, technical and other staffing services. Also, as a result of the current
economic recession, net sales of services were lower by $1.8 million (28.1%) in
the Financial Outsourcing Services segment.
Cost of services for the six months ended June 30, 2002 was 81.3% of net
sales of services as compared to cost of services of 78.6% for the six months
ended July 1, 2001. The cost of services as a percentage of net sales for the
six months ended June 30, 2002 increased from the comparable period in 2001
principally as a result of lower sales (and gross margin percentages on sales)
to telecom customers, a decrease in permanent placement fees and a higher growth
in Human Capital Management Services which has a higher cost of services as a
percentage of net sales of services.
Selling, general and administrative expenses as a percentage of net sales
of services were 14.7% for the six months ended June 30, 2002, compared to 14.6%
for the six months ended July 1, 2001. This percentage increase is principally a
result of significantly lower net sales of services during the first six months
of 2002. Due to these lower sales, as discussed above, management continues to
undertake initiatives to reduce selling, general and administrative costs. These
costs were further reduced by lower commissions as a result of the decrease of
sales discussed above.
Operating income for the six months ended June 30, 2002 was $5.5 million as
compared to operating income of $12.1 million for the six months ended July 1,
2001. This 54.3% decrease in operating income for the six months ended June 30,
2002 resulted principally from a decrease in sales and gross margins in Staff
Augmentation and Financial Outsourcing Services segments, partially offset by a
reduction of $2.1 million in goodwill amortization.
The Company's interest expense for the six months ended June 30, 2002 is
attributable to the revolving credit facility agented by IBJ Whitehall Business
Credit Corporation (the "IBJ Credit Facility"), the Convertible Notes, the 12%
Senior Notes due 2007 (the "Senior Notes") and the PIK Debentures. The Company's
interest expense for the six months ended July 1, 2001 is attributable to the
IBJ Credit Facility, the Senior Notes and the PIK Debentures. During the first
quarter of 2001, the Company repurchased $13.0 million principal amount of
Senior Notes for $8.9 million and $5.2 million principal amount of PIK
Debentures for $2.5 million (including accrued and unpaid interest of $340,000),
the repurchase prices of which were paid from lower interest rate borrowings
under the IBJ Credit Facility. In September 2001, the Company completed the
exchange of $18.0 million principal amount of PIK Debentures for its Convertible
Note in the original principal amount of $8.0 million (bearing interest at the
per annum rate of 8%), plus $1.0 million in cash. The interest expense was lower
for the six months ended June 30, 2002 as compared to the six months ended July
1, 2001 due to lower market interest rates and lower borrowing levels under the
IBJ Credit Facility as well as the reduction of Senior Notes and PIK Debentures
through the transactions described above.
The income tax benefit for the six months ended June 30, 2002 was $429,000
on a loss before tax of $2.4 million. The income tax provision for the six
months ended July 1, 2001 was $4.2 million on income before tax of $7.8 million.
Applying SFAS 145 (in accordance with the criteria in APB Opinion 30), the gain
on the extinguishment of debt, net of related income tax effect, for the six
months ended July 1, 2001 was recorded as other income (before any tax effect),
which in turn required that the income before tax and the provision for income
taxes line items be adjusted accordingly. The Company provides for income taxes
based upon the estimated effective rate (on a year-to-date basis). As a result
of the Company's revised forecasts in the second quarter of 2002, the expected
tax rate was reduced. The difference between the federal statutory income tax
rate and the Company's effective tax rate relates primarily to the
nondeductibility of a portion of the interest expense associated with the PIK
Debentures and state income taxes for both periods as well as amortization
expense associated with goodwill that was not deductible in 2001.
Financial Condition, Liquidity and Capital Resources
The Company generally pays its billable employees weekly for their
services, and remits certain statutory payroll and related taxes as well as
other fringe benefits. Invoices are generated to reflect these costs plus the
Company's markup. These bills are typically paid within 45 days. Increases in
the Company's net sales of services, resulting from expansion of existing
offices or establishment of new offices, will require additional cash resources.
The Company is under certain contractual commitments associated with
operating agreements, obligations to financial institutions and other long-term
debt obligations and earnout (contingent payment) agreements described under
"Financial Condition, Liquidity and Capital Resources" in Item 7 of the
Company's Annual Report on Form 10-K for the year ended December 30, 2001.
During the three months ended June 30, 2002, the Company's primary sources
of funds to meet working capital needs were from borrowings under the IBJ Credit
Facility. Cash and cash equivalents increased $964,000 during the three months
ended June 30, 2002. Cash flows provided by operating activities of $8.4 million
exceeded cash flows used in financing activities of $5.4 million and cash flows
used in investing activities of $2.1 million.
As of June 30, 2002, the Company had outstanding $44.0 million principal
amount under the IBJ Credit Facility bearing interest at a weighted average rate
of 4.5% per annum. In addition, as of June 30, 2002, the Company had outstanding
$11.2 million principal amount of PIK Debentures bearing interest at a rate of
15% per annum, $87.0 million principal amount of Senior Notes bearing interest
at a rate of 12% per annum and $8.5 million principal amount of Convertible
Notes bearing interest at the rate of 8% per annum. As more fully described
below, interest on the PIK Debentures and the Convertible Notes may be satisfied
through the issuance of new PIK Debentures and Convertible Notes. To date, the
Company has chosen to issue new PIK Debentures and Convertible Notes to pay
interest thereon.
The Company entered into the IBJ Credit Facility in December 2000 to
provide greater borrowing availability and flexibility. The IBJ Credit Facility
has been amended six times since it was entered into, most recently to ensure
the Company's compliance with financial covenants at March 31, 2002, described
below and to lessen the requirements through December, 2003. The IBJ Credit
Facility, as amended, has permitted the Company to execute its strategy of
reducing its higher interest rate debt and improving its balance sheet by
retiring Senior Notes and PIK Debentures. The IBJ Credit Facility currently
provides for borrowing availability of up to $95.0 million based upon a
specified percentage of the Company's eligible accounts receivable. At June 30,
2002, the Company had remaining availability based upon then outstanding
eligible accounts receivable of $14.0 million.
Effective as of May 10, 2002, the Company has entered into an amendment to
the IBJ Credit Facility to, among other things (i) waive the Company's
non-compliance with the fixed-charge coverage ratio for the period ended March
31, 2002, (ii) reduce the fixed-charge coverage ratio in future periods, and
(iii) increase each level of the applicable rate and LIBOR margins by 0.25%. As
of June 30, 2002, the incremental rate was 3.0%.
The scheduled maturity date of the IBJ Credit Facility is December 14,
2003. The Company intends to seek to extend the IBJ Credit Facility or to seek
to obtain alternative financing.
Substantially all of the consolidated net assets of the Company are assets
of COI and all of the net income that has been generated by the Company through
June 30, 2002 is net income attributable to the operations of COI. Accordingly,
except for permitted distributions, these assets and net income are restricted
as to their use by COMFORCE. The indenture governing the Senior Notes imposes
restrictions on COI making specified payments, which are referred to as
"restricted payments," including making distributions or paying dividends
(referred to as upstreaming funds) to COMFORCE. Under the indenture, COI is not
permitted to make cash distributions to COMFORCE other than (1) to upstream $2.0
million annually ($1.25 million annually prior to 2000) to pay public company
expenses, (2) to upstream up to $10.0 million to pay income tax related to
deemed forgiveness of PIK Debentures to facilitate the purchase or exchange by
COMFORCE of PIK Debentures at less than par, (3) under certain circumstances in
connection with a disposition of assets, to upstream proceeds therefrom to repay
the PIK Debentures, and (4) to upstream funds to the extent COI meets the
restricted payments test under the indenture.
Management believes that $2.0 million annually (if COI has funds available
for this purpose) will be sufficient to pay COMFORCE's annual public company
expenses for the foreseeable future. As of June 30, 2002, COI had approximately
$1.6 million remaining available for distribution to COMFORCE as permitted
restricted payments (representing 50% of consolidated net income of COI for the
period from January 1, 1998 through June 30, 2002, less the total amount of
restricted payments through such date).
Through December 1, 2002, interest under the PIK Debentures is payable, at
the option of COMFORCE, in cash or in kind through the issuance of additional
PIK Debentures. In addition, through December 1, 2003, interest on the
Convertible Notes is payable, at the option of COMFORCE, in cash or in kind
through the issuance of additional Convertible Notes. To date, COMFORCE has paid
all interest under the PIK Debentures and Convertible Notes in kind. Beginning
with the interest payment due June 1, 2003, COMFORCE will be required to pay
interest on the PIK Debentures in cash, and beginning with the interest payment
due June 1, 2004, COMFORCE will be required to pay interest on the Convertible
Notes in cash. Its ability to do so will be dependent on the ability of COI to
borrow funds for this purpose under the IBJ Credit Facility and to upstream
funds under the restricted payments test. In addition, COMFORCE's ability to
repay the PIK Debentures and the Convertible Notes at their respective maturity
dates in December 2009, or on any earlier required repayment or repurchase
dates, will also be dependent on the ability of COI to upstream funds for these
purposes under the restricted payments test, unless COMFORCE separately obtains
a loan or sells its capital stock or other securities to provide funds therefor.
The Convertible Note is convertible into the Company's common stock based
on a price of $1.70 per share of common stock, provided that if such conversion
would result in a change of control occurring under the terms of the indentures
governing the PIK Debentures or the Senior Notes, the Convertible Note will be
convertible into shares of non-voting preferred stock having a nominal
liquidation preference (but no other preferences), which in turn will be
convertible into common stock at the holder's option at any time so long as the
conversion would not result in a change of control. Notice of conversion must be
given at least 61 days in advance.
As of June 30, 2002, approximately $79.2 million, or 43.8%, of the
Company's total assets were goodwill recorded in connection with the Company's
acquisitions. Effective December 31, 2001, the Company ceased recording
amortization expense relating to goodwill amounting to approximately $4.2
million annually upon its required adoption of a new accounting standard (SFAS
142), as described under note 6 to the consolidated financial statements. As
also described under note 6, the Company evaluated the recoverability of
goodwill on its books under the new standards under SFAS 142, resulting in its
write-off of $55.0 million of goodwill in the first quarter of 2002.
The Company was obligated under various agreements to make earn-out
payments to the sellers of companies acquired by the Company and to sellers of
franchised businesses repurchased by the Company, subject to the sellers meeting
specified contractual requirements. During fiscal 2002, the Company made
earn-out payments totaling $323,000. It has no remaining obligation to make
earn-out payments to any person in future periods.
Management of the Company believes that cash flow from operations and funds
anticipated to be available under the IBJ Credit Facility will be sufficient to
service the Company's indebtedness and to meet currently anticipated working
capital requirements.
The Company is currently undergoing a payroll tax audit by the Internal
Revenue Service for the fiscal year 1999. The results under this audit are not
yet known.
Seasonality
The Company's quarterly operating results are affected primarily by the
number of billing days in the quarter and the seasonality of its customers'
businesses. Demand for technical and engineering services, IT and telecom
staffing services has historically been lower during the second half of the
fourth quarter through the following first quarter, and, generally, shows
gradual improvement until the second half of the fourth quarter; however, the
Company's revenues have declined since the first quarter of 2001 as a result of
the economic climate generally and in certain of the industries served by the
Company or other factors.
Forward Looking Statements
Various statements made in this Report concerning the manner in which the
Company intends to conduct its future operations, and potential trends that may
impact future results of operations, are forward looking statements. The Company
may be unable to realize its plans and objectives due to various important
factors, including, but not limited to the following: a continuation of the
current recessionary environment, particularly in the aircraft manufacturing,
telecom, information technology and other sectors served by the Company (which
may reflect cyclical conditions or fundamental changes in these industries),
could further reduce demand for contingent personnel and further heighten the
competition for customers, resulting in lower revenues and margins and affecting
the Company's ability to continue to meet the financial covenants under the IBJ
Credit Facility; the Company's significant leverage may leave it with a
diminished ability to obtain additional financing for working capital or other
capital expenditures, for retiring higher interest rate debt or for otherwise
improving the Company's competitiveness and capital structure or expanding its
operations; recently adopted SFAS 142, which requires the Company to evaluate
annually the recoverability of goodwill on its books, could cause the Company to
write-off goodwill in future periods (in addition to the write-off of $55.0
million in the first quarter of 2002), which could have a material adverse
impact on the Company's financial condition and results of operations; or, if
COI fails to generate sufficient consolidated net income or have other funds
available to upstream to COMFORCE under the restricted payments test of the
Senior Notes indenture in order for it to pay cash interest on the PIK
Debentures (which is required beginning June 1, 2003) or the Convertible Note
(which is required beginning June 1, 2004) or to repay the PIK Debentures or the
Convertible Note at their maturity in December 2009, or on any earlier required
repayment or repurchase date, then, unless COMFORCE obtains a loan or sells its
capital stock or other securities to provide funds for this purpose, the Company
will default under the indentures governing the PIK Debentures and the Senior
Notes and under the IBJ Credit Facility.
Additional important factors that could cause the Company to be unable to
realize its plans and objectives are described under "Risk Factors" in the
Registration Statement on Form S-3 of the Company filed with the Securities and
Exchange Commission on December 21, 2000 (Registration No. 333-52356). The
disclosure under "Risk Factors" in the Registration Statement may be accessed
through the Web site maintained by the Securities and Exchange Commission at
"www.sec.gov." In addition, the Company will provide, without charge, a copy of
such "Risk Factors" disclosure to each stockholder of the Company who requests
such information. Requests for copies should be directed to the attention of
Linda Annicelli, Vice President, Administration at COMFORCE Corporation, 415
Crossways Park Drive, P.O. Box 9006, Woodbury, New York 11797, telephone
516-437-3300.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by Item 3 has been disclosed in Item 7A of the
Company's Annual Report on Form 10-K for the year ended December 30, 2001. There
has been no material change in the disclosure regarding market risk.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Since the date of the filing of the Company's Annual Report on Form 10-K
for the year ended December 30, 2001, there have been no material new legal
proceedings involving the Company or any material developments to the
proceedings described in such 10-K.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
On June 13, 2002, the annual meeting of the stockholders of the Company was
held. At this meeting, the stockholders voted on (1) the election of directors,
with each to serve for a term of one year, and (2) the approval of the COMFORCE
Corporation 2002 Stock Option Plan, and (3) ratification of the appointment of
KPMG LLP as the Company's auditors for the year ending December 29, 2002.
The following individuals were elected to the Board of Directors upon the
vote shown:
Nominee For Withheld
John C. Fanning 14,017,438 118,275
Harry Maccarrone 14,056,944 78,769
Rosemary Maniscalco 14,056,944 78,769
Kenneth J. Daley 14,017,444 118,269
Daniel Raynor 14,056,944 78,769
Gordon Robinett 14,056,944 78,769
The COMFORCE Corporation 2002 Stock Option Plan was approved upon the
following vote:
Abstentions and
For Against Broker non-Votes
7,623,055 287,009 6,225,649
The appointment of KPMG LLP was ratified and approved upon the following
vote:
Abstentions and
For Against Broker non-Votes
14,096,784 32,820 6,109
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Fourth Amendment, dated as of July 1, 2002, to Employment
Agreement dated as of January 1, 1999 and as previously amended as of
March 28, 2000, January 23, 2001 and September 27, 2001, among John C.
Fanning, COMFORCE Corporation and COMFORCE Operating, Inc.
10.2 Third Amendment, dated as of July 1, 2002, to Employment
Agreement dated as of January 1, 1999 and as previously amended as of
January 23, 2001 and September 27, 2001, among Harry V. Maccarrone,
COMFORCE Corporation and COMFORCE Operating, Inc.
10.3 Deferred Vacation Plan adopted July 17, 2002.
99.1 Certification of Chief Executive Officer and Chief Financial
Officer.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.
COMFORCE Corporation
By: /s/ Harry Maccarrone
--------------------------------------------
Harry Maccarrone, Executive Vice President
and Chief Financial Officer
Date: August 13, 2002